Health Insurance Reforms Mandate Refunds Of $13 Million To New Jersey Small Employers

TRENTON - Governor Christie Whitman and Department of Banking and Insurance Commissioner Elizabeth Randall today announced that health insurance companies and HMOs will pay more than $13 million in refunds to thousands of New Jersey small employers. The refunds are mandated by the State's health insurance reform laws and reflect excess health benefits plan premiums employers paid to insurance carriers and HMOs in calendar year 1995. This is the second mandated refund; carriers were required to pay more than $5 million in refunds for excess premiums charged in calendar year 1994.

"Small businesses are the backbone of New Jersey's strong economy. This mandated refund of $13 million puts money back into business where it can keep people employed and keep business growing," said Whitman.

"Our health insurance reform laws are continuing to protect New Jersey small employers," Randall said. "This is the second year in a row that we have required carriers to provide refunds to small employers."

Wardell Sanders, acting executive director of the New Jersey Small Employer Health Benefits ("SEH") Program Board, the state agency responsible for regulating the small employer health benefits market, joined in the announcement.

"New Jersey law requires carriers to pay out at least 75 cents in benefits for every premium dollar collected, ensuring that small employers receive a fair return on the health coverage premiums they pay," Sanders said. "These refunds demonstrate that the reformed market protects the interests of small employers," Sanders said. Sanders also noted that since the SEH Program and the Individual Health Coverage Program over four years ago, enrollment in the reformed markets has exceeded one million for the first time.

Under the health coverage market reforms that took effect in 1994, small employers with 2-50 employees are guaranteed refunds if their health carrier does not meet a 75 percent loss ratio requirement, meaning that it must pay out at least 75 cents in benefits for every premium dollar collected. Loss ratio requirements apply separately to each standard plan, and to all of a carrier's prereform plans considered together. The Department of Banking and Insurance reviews carriers' annual premium and claims data for the plans to determine whether a refund is due and approve each carrier's refund plan.

For calendar year 1994, 25 carriers were required to refund $5,219,906. For calendar yeay 1995, 32 carriers will be required to refund $13,021,497 out of total premiums of $1,205,206,127. Refunds of up to 48.6 percent of premium will be made.

Small employers entitled to refunds will receive notice directly from the carrier that issued their coverage in 1995. The timing of the refunds is based on the Department's approval of each carrier's filed refund plan; refunds for 1995 plans began in January of 1997 and should be completed sometime in August. Since the refunds apply by type of plan, not all small employers that secured coverage from one of the carriers required to provide refunds will be entitled to a refund. The deadline for carriers to report 1996 premium and claims data is August 1997; it is anticipated that refunds for 1996 plans will be completed by December 1997.

A free Buyer's Guide containing information about health coverage for small employers including a Premium Comparison insert, is available by calling 1-800-263-5912.